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First Midwest Bancorp, Inc. Announces 2016 Third Quarter Results

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ITASCA, Ill., Oct. 18, 2016 (GLOBE NEWSWIRE) -- First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ: FMBI), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the third quarter of 2016. Net income for the third quarter of 2016 was $28.4 million, or $0.35 per share. This compares to $25.3 million, or $0.31 per share, for the second quarter of 2016, and $23.3 million, or $0.30 per share, for the third quarter of 2015. Performance for the third and second quarters of 2016 was impacted by acquisition and integration related pre-tax expenses of $1.2 million and $618,000, respectively. In addition, a pre-tax gain of $5.5 million was recorded in the third quarter of 2016 as a result of the completion of the Company's sale-leaseback transaction announced during the quarter. Excluding these transactions, earnings per share was $0.32 for the third quarter of 2016, consistent with the second quarter of 2016.

SELECT THIRD QUARTER HIGHLIGHTS

  • Increased earnings per share to $0.35, up 13% from the second quarter of 2016 and 17% from third quarter of 2015.
  • Grew fee-based revenues to $38 million, an increase of 7% from the second quarter of 2016 and 16% from the third quarter of 2015.
  • Improved efficiency ratio (1) to 61%, consistent with the second quarter of 2016 and down from 63% for the third quarter of 2015.
  • Expanded total loans to $8 billion, up 10% annualized from June 30, 2016 and 18% from September 30, 2015.
  • Grew average core deposits to $8 billion, up 2% from the second quarter of 2016 and 12% from the third quarter of 2015.
  • Completed the Company's previously announced sale-leaseback transaction, which resulted in proceeds of $150 million and a pre-tax gain of $5.5 million in the third quarter of 2016.
  • Enhanced total capital to risk-weighted assets to 12.3%, which benefited from the issuance of $150 million of 5.875% subordinated notes.

"Performance for the quarter was once again strong," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "Operating performance for the quarter reflected robust production across our sales platforms and continued focus on improving our efficiency. Measured expansion of our lending capabilities continues to provide diversified portfolio growth. Additionally, we moved to strengthen our capital foundation, enhancing our future capacity for growth."

Mr. Scudder continued, "As we look to close the year, our underlying business momentum is building and aided by the strength of our balance sheet. Our pending acquisition of Standard Bank and Trust Company remains on track and will further position us as the premier market leader in metro Chicago. As always, we remain centered on those actions which help our clients to achieve financial success, enhance the value of our franchise, and inure to the long-term benefit of our shareholders."

(1) The efficiency ratio is a Non-GAAP financial measure. For details on the calculation, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

SIGNIFICANT THIRD QUARTER EVENTS

Sale-Leaseback Transaction

On September 27, 2016, the Bank completed a sale-leaseback transaction, whereby the Bank sold to Oak Street Real Estate Capital, LLC ("Oak Street"), for an aggregate cash purchase price of $150.3 million, 55 properties owned and operated by the Bank as branches. Upon the sale of the branches to Oak Street, the Bank concurrently entered into triple net lease agreements with certain affiliates of Oak Street for each of the branches sold. Subject to the right of the Bank to terminate certain of the lease agreements at the end of the eleventh year, the lease agreements have initial terms of 14 years. Each lease agreement provides the Bank with five consecutive renewal options of five years each. The sale-leaseback transaction resulted in a pre-tax gain of $88.0 million, net of transaction related expenses, of which $5.5 million was immediately recognized in earnings with the remaining $82.5 million to be accreted into income on a straight-line basis over the initial terms of the leases. The Company expects the investment of proceeds and the gain from the sale of the branches, net of occupancy expenses associated with the branches, will be modestly accretive to the Company's earnings over the initial term of the lease agreements.

Issuance of Subordinated Notes

On September 29, 2016, the Company completed the issuance and sale of $150.0 million aggregate principal amount of its 5.875% subordinated notes due 2026. Interest on the notes is payable semiannually beginning on March 29, 2017. The Company received proceeds of $146.5 million, net of underwriting discounts and commissions and issuance costs. The Company expects to use the net proceeds to repay at maturity the entire $115.0 million aggregate principal amount outstanding of its 5.875% senior notes due November 22, 2016, plus accrued interest, and for other general corporate purposes.

ACQUISITION

Standard Bancshares, Inc.

On June 28, 2016, the Company entered into a definitive agreement to acquire Standard Bancshares, Inc. ("Standard"), the holding company for Standard Bank and Trust Company. With the acquisition, the Company would acquire 35 banking offices primarily in the southwest Chicago suburbs and adjacent markets in northwest Indiana. As of June 30, 2016, Standard had total assets of approximately $2.5 billion with $2.2 billion in deposits, of which over 90% were core deposits, and $1.8 billion in loans, of which 80% were commercial-related. If the merger is completed, the merger consideration to Standard shareholders will be Company common stock, with an overall transaction value of approximately $365 million as of the date of announcement. The acquisition is expected to close in late 2016 or early 2017, subject to customary regulatory approvals and closing conditions, as well as Company and Standard shareholder approval.

OPERATING PERFORMANCE

  
Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
  
 Quarters Ended
 September 30, 2016  June 30, 2016  September 30, 2015
 Average
Balance
 Interest
Earned/
Paid
 Yield/
Rate
(%)
  Average
Balance
 Interest
Earned/
Paid
 Yield/
Rate
(%)
  Average
Balance
 Interest
Earned/
Paid
 Yield/
Rate
(%)
Assets:                   
Other interest-earning assets$282,101  $472  0.67   $300,945  $426  0.57   $820,318  $645  0.31 
Securities (1)1,896,195  10,752  2.27   1,721,781  10,636  2.47   1,194,711  9,559  3.20 
Federal Home Loan Bank ("FHLB") and
  Federal Reserve Bank ("FRB") stock
51,451  261  2.03   42,561  200  1.88   38,748  369  3.81 
Loans (1)(2)8,067,900  88,500  4.36   7,883,806  87,481  4.46   6,887,611  76,328  4.40 
Total interest-earning assets (1)10,297,647  99,985  3.87   9,949,093  98,743  3.99   8,941,388  86,901  3.86 
Cash and due from banks150,467       154,693       132,504     
Allowance for loan losses(84,088)      (80,561)      (73,928)    
Other assets958,299       945,291       875,668     
Total assets$11,322,325       $10,968,516       $9,875,632     
Liabilities and Stockholders' Equity:                   
Interest-bearing core deposits (3)$5,090,820  1,086  0.08   $4,941,779  991  0.08   $4,465,956  931  0.08 
Time deposits1,248,425  1,434  0.46   1,277,694  1,491  0.47   1,173,127  1,398  0.47 
Borrowed funds605,177  1,782  1.17   461,363  1,499  1.31   168,807  928  2.18 
Senior and subordinated debt166,101  2,632  6.30   162,836  2,588  6.39   201,083  3,133  6.18 
Total interest-bearing liabilities7,110,523  6,934  0.39   6,843,672  6,569  0.39   6,008,973  6,390  0.42 
Demand deposits (3)2,806,851       2,771,813       2,601,442     
Total funding sources9,917,374       9,615,485       8,610,415     
Other liabilities143,249       117,534       130,250     
Stockholders' equity - common1,261,702       1,235,497       1,134,967     
Total liabilities and
  stockholders' equity
$11,322,325       $10,968,516       $9,875,632     
Tax-equivalent net interest
  income/margin (1)
  93,051  3.60     92,174  3.72     80,511  3.58 
Tax-equivalent adjustment  (2,079)      (2,193)      (2,609)  
Net interest income (GAAP)  $90,972       $89,981       $77,902   
                          

(1) Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%. The corresponding income tax impact related to tax-exempt items is recorded in income tax expense. These adjustments have no impact on net income. For details on the calculation of tax-equivalent net interest income, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

(2) Includes loans acquired through Federal Deposit Insurance Corporation ("FDIC")-assisted transactions subject to loss sharing agreements ("covered loans"), which totaled $24.3 million, $27.2 million, and $51.2 million at September 30, 2016, June 30, 2016, and September 30, 2015, respectively.

(3) See the Deposit Composition table presented later in this release for average balance detail by category.

For the third quarter of 2016, total average interest-earning assets rose $348.6 million from the second quarter of 2016 and $1.4 billion from the third quarter of 2015. The increase from both prior periods presented resulted from organic loan growth and security purchases. In addition, the rise in average interest-earning assets compared to the third quarter of 2015 was impacted by interest-earning assets acquired in the NI Bancshares Corporation ("NI Bancshares") transaction late in the first quarter of 2016 and the Peoples Bancorp, Inc. ("Peoples") transaction late in the fourth quarter of 2015.

Average funding sources increased by $301.9 million from the second quarter of 2016 and $1.3 billion from the third quarter of 2015. Compared to the second quarter of 2016, the rise resulted primarily from the addition of $200.0 million of FHLB advances and seasonally higher levels of interest-bearing core deposits and demand deposits. Deposits acquired in the NI Bancshares and Peoples transactions and the addition of $462.5 million of FHLB advances contributed to the increase in average funding sources compared to the third quarter of 2015.

Tax-equivalent net interest margin for the current quarter was 3.60%, decreasing 12 basis points from the second quarter of 2016 and increasing 2 basis points from the third quarter of 2015. The decline in tax-equivalent net interest margin from the second quarter of 2016 was due primarily to the redeployment of the typical third quarter seasonal increase of municipal tax deposits into investments, the continued shift in the loan mix to floating rate loans, and a modest decline in acquired loan accretion. Compared to the third quarter of 2015, the increase in tax-equivalent net interest margin was driven by higher accretion on acquired loans and the maturity of $38.5 million of subordinated notes early in the second quarter of 2016, which were partially offset by the continued shift in the loan mix to floating rate loans.

Net interest income increased by 4.4% on an annualized basis from the second quarter of 2016 and 16.8% compared to the third quarter of 2015. The rise in net interest income from the second quarter of 2016 resulted primarily from growth in interest-earning assets, which more than offset the decline in margin. Compared to the third quarter of 2015, the increase in net interest income was driven primarily by organic loan growth and the acquisition of interest-earning assets from the NI Bancshares and Peoples transactions.

Acquired loan accretion contributed $3.8 million, $3.9 million, and $1.8 million to net interest income for the third quarter of 2016, the second quarter of 2016, and the third quarter of 2015, respectively.

     
Fee-based Revenues and Total Noninterest Income Analysis
(Dollar amounts in thousands)
     
  Quarters Ended September 30, 2016
Percent Change From
  September 30,
 2016
 June 30,
 2016
 September 30,
 2015
 June 30,
 2016
 September 30,
 2015
Service charges on deposit accounts $10,708  $10,169  $10,519  5.3  1.8 
Wealth management fees 8,495  8,642  7,222  (1.7) 17.6 
Card-based fees 7,332  7,592  6,868  (3.4) 6.8 
Merchant servicing fees 3,319  3,170  3,207  4.7  3.5 
Mortgage banking income 3,394  1,863  1,402  82.2  142.1 
Other service charges, commissions, and fees 5,218  4,498  3,900  16.0  33.8 
Total fee-based revenues 38,466  35,934  33,118  7.0  16.1 
Net gain on sale-leaseback transaction 5,509        100.0 
Net securities gains 187  23  524  713.0  (64.3)
Other income 1,691  1,865  1,372  (9.3) 23.3 
Total noninterest income $45,853  $37,822  $35,014  21.2  31.0 
                   

Total fee-based revenues of $38.5 million grew by $2.5 million, or 7.0%, compared to the second quarter of 2016, and $5.3 million, or 16.1%, compared to the third quarter of 2015. Higher mortgage banking income and sales of capital market products to commercial clients within other service charges, commissions, and fees drove the majority of the increase compared to both prior periods presented. Mortgage banking income rose as a result of $107.3 million in sales of 1-4 family mortgage loans in the secondary market during the third quarter of 2016, compared to $52.1 million in the second quarter of 2016 and $42.2 million in the third quarter of 2015. The rise in service charges on deposit accounts compared to the second quarter of 2016 reflects seasonally higher activity. Card-based fees declined modestly from the second quarter of 2016 due to normal seasonality. Compared to the third quarter of 2015, services provided to customers acquired in the NI Bancshares and Peoples transactions contributed to the increase.

During the third quarter of 2016, the Company completed a sale-leaseback transaction of 55 branches that resulted in a pre-tax gain of $88.0 million, net of transaction related expenses, of which $5.5 million was immediately recognized and the remaining $82.5 million was deferred and will be accreted against lease expense over the initial terms of the leases.

Total noninterest income of $45.9 million grew 21.2% and 31.0% from the second quarter of 2016 and the third quarter of 2015, respectively.

     
Noninterest Expense Analysis
(Dollar amounts in thousands)
     
  Quarters Ended September 30, 2016
Percent Change From
  September 30,
 2016
 June 30,
 2016
 September 30,
 2015
 June 30,
 2016
 September 30,
 2015
Salaries and employee benefits:          
Salaries and wages $37,872  $37,916  $33,554  (0.1) 12.9 
Retirement and other employee benefits 8,500  8,351  7,807  1.8  8.9 
Total salaries and employee benefits 46,372  46,267  41,361  0.2  12.1 
Net occupancy and equipment expense 10,755  9,928  9,406  8.3  14.3 
Professional services 6,772  5,292  6,172  28.0  9.7 
Technology and related costs 3,881  3,669  3,673  5.8  5.7 
Merchant card expense 2,857  2,724  2,722  4.9  5.0 
Advertising and promotions 1,941  1,927  1,828  0.7  6.2 
Cardholder expenses 1,515  1,512  1,354  0.2  11.9 
Net other real estate owned ("OREO") expense 313  1,122  1,290  (72.1) (75.7)
Other expenses 7,310  8,295  6,559  (11.9) 11.4 
Total noninterest expense excluding
  acquisition and integration related
  expenses (1)
 81,716  80,736  74,365  1.2  9.9 
Acquisition and integration related expenses 1,172  618    89.6  100.0 
Total noninterest expense $82,888  $81,354  $74,365  1.9  11.5 
Efficiency ratio (2) 61% 61% 63%    
              

(1) See the Non-GAAP Financial Information discussion for detail.

(2) The efficiency ratio expresses noninterest expense, excluding OREO expense, as a percentage of tax-equivalent net interest income plus total fee-based revenues, other income, and tax-equivalent adjusted bank-owned life insurance ("BOLI") income. In addition, acquisition and integration related pre-tax expenses of $1.2 million and $618,000 are excluded from the efficiency ratio for the third and second quarters of 2016, respectively.  For details on the calculation of the efficiency ratio, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

The efficiency ratio was consistent at 61% compared to the second quarter of 2016 and improved from 63% for the third quarter of 2015. Excluding acquisition and integration related expenses, total noninterest expense increased by 1.2% from the second quarter of 2016 and 9.9% compared to the third quarter of 2015.

Compared to the second quarter of 2016, the rise in net occupancy and equipment expense was driven primarily by seasonally higher utilities, as well as increases in computer processing and software maintenance contracts. The increase in professional services from the second quarter of 2016 was impacted by lower than normal loan remediation expenses in the second quarter of 2016 and also reflects the variability in the timing of these expenditures. Net OREO expense decreased from the second quarter of 2016 due to reduced valuation adjustments and lower operating expenses. Other expenses were lower in the third quarter of 2016 due primarily to the change in the reserve for unfunded commitments compared to the third quarter of 2016.

The operations associated with the NI Bancshares and Peoples transactions contributed to approximately half of the increase from third quarter of 2015. These costs primarily occurred within salaries and employee benefits expense, net occupancy and equipment expense, professional services, and other expense. In addition, compensation costs associated with merit increases and investments in additional talent and systems to support organizational growth contributed to the rise compared to the third quarter of 2015.

LOAN PORTFOLIO AND ASSET QUALITY

     
Loan Portfolio Composition
(Dollar amounts in thousands)
     
  As of September 30, 2016
Percent Change From
  September 30,
2016
 June 30,
2016
 September 30,
2015
 June 30,
2016
 September 30,
2015
Commercial and industrial $2,849,399  $2,699,742  $2,392,860  5.5  19.1 
Agricultural 409,571  401,858  393,732  1.9  4.0 
Commercial real estate:          
Office, retail, and industrial 1,537,038  1,529,675  1,414,077  0.5  8.7 
Multi-family 625,305  587,104  539,308  6.5  15.9 
Construction 401,857  371,016  192,086  8.3  109.2 
Other commercial real estate 970,855  1,000,655  869,748  (3.0) 11.6 
Total commercial real estate 3,535,055  3,488,450  3,015,219  1.3  17.2 
Total corporate loans 6,794,025  6,590,050  5,801,811  3.1  17.1 
Home equity 733,260  722,881  647,223  1.4  13.3 
1-4 family mortgages 388,145  415,581  294,261  (6.6) 31.9 
Installment 232,030  223,845  131,185  3.7  76.9 
Total consumer loans 1,353,435  1,362,307  1,072,669  (0.7) 26.2 
Covered loans 24,322  27,180  51,219  (10.5) (52.5)
Total loans $8,171,782  $7,979,537  $6,925,699  2.4  18.0 
                   

Total loans grew by 9.6% on an annualized basis from June 30, 2016 and 13.7% from September 30, 2015, excluding loans acquired in the NI Bancshares transaction of $299.7 million. Compared to both prior periods presented, growth in commercial and industrial loans reflects broad-based increases within our middle market and sector-based lending business units. Multi-family loans increased compared to both prior periods due to organic growth. The rise in construction loans compared to both prior periods was driven mainly by select commercial projects for which permanent financing is expected upon their completion.

Growth in consumer loans compared to September 30, 2015 was due to the continued expansion of mortgage and installment loans, as well as the addition of shorter-duration, floating rate home equity loans. Compared to June 30, 2016, sales of 1-4 family mortgages on the secondary market more than offset organic growth in consumer loans.

     
Asset Quality
(Dollar amounts in thousands)
     
  As of September 30, 2016
Percent Change From
  September 30,
 2016
 June 30,
 2016
 September 30,
 2015
 June 30,
 2016
 September 30,
 2015
Asset quality, excluding covered
  loans and covered OREO
          
Non-accrual loans $43,797  $36,859  $32,308  18.8  35.6 
90 days or more past due loans, still accruing
  interest
 4,318  5,406  4,559  (20.1) (5.3)
Total non-performing loans 48,115  42,265  36,867  13.8  30.5 
Accruing troubled debt restructurings
  ("TDRs")
 2,368  2,491  2,771  (4.9) (14.5)
OREO 27,986  29,452  31,129  (5.0) (10.1)
Total non-performing assets $78,469  $74,208  $70,767  5.7  10.9 
30-89 days past due loans $25,849  $22,770  $28,629     
Non-accrual loans to total loans 0.54% 0.46% 0.47%    
Non-performing loans to total loans 0.59% 0.53% 0.54%    
Non-performing assets to total loans plus
  OREO
 0.96% 0.93% 1.02%    
Allowance for Credit Losses          
Allowance for loan losses $85,308  $80,105  $72,500     
Reserve for unfunded commitments 1,000  1,400  1,225     
Total allowance for credit losses $86,308  $81,505  $73,725     
Allowance for credit losses to total loans (1) 1.06% 1.02% 1.06%    
Allowance for credit losses to loans, excluding
  acquired loans
 1.13% 1.11% 1.14%    
Allowance for credit losses to non-accrual
  loans, excluding covered loans
 194.11% 217.34% 215.45%    
              

(1) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses on acquired loans is established as necessary to reflect credit deterioration.

Non-accrual loans increased by $6.9 million from June 30, 2016, due primarily to the transfer of a corporate loan relationship to non-accrual status during the third quarter of 2016, for which the Bank believes it is adequately collateralized.

Total non-performing assets represented 0.96% of total loans and OREO at September 30, 2016, compared to 0.93% at June 30, 2016 and down from 1.02% at September 30, 2015.

   
Charge-Off Data
(Dollar amounts in thousands)
   
  Quarters Ended
  September 30,
 2016
 % of
Total
 June 30,
 2016
 % of
Total
 September 30,
 2015
 % of
Total
Net loan charge-offs (1):            
Commercial and industrial $1,145  23.9  $1,450  28.3  $1,601  52.3 
Agricultural            
Office, retail, and industrial 2,151  44.9  1,633  31.8  457  14.9 
Multi-family (69) (1.4) 83  1.6  67  2.2 
Construction (9) (0.2) (12) (0.2) (114) (3.7)
Other commercial real estate 415  8.7  810  15.8  92  3.0 
Consumer 1,162  24.2  1,164  22.7  959  31.3 
Covered     2    1   
Total net loan charge-offs $4,795  100.0  $5,130  100.0  $3,063  100.0 
             
Net loan charge-offs to average
  loans, annualized:
            
Quarter-to-date 0.24%   0.26%   0.18%  
Year-to-date 0.24%   0.24%   0.33%  

(1) Amounts represent charge-offs, net of recoveries.

DEPOSIT PORTFOLIO

     
Deposit Composition
(Dollar amounts in thousands)
     
  Average for Quarters Ended September 30, 2016
Percent Change From
  September 30,
 2016
 June 30,
 2016
 September 30,
 2015
 June 30,
 2016
 September 30,
 2015
Demand deposits $2,806,851  $2,771,813  $2,601,442  1.3  7.9 
Savings deposits 1,655,604  1,655,566  1,471,003    12.5 
NOW accounts 1,754,330  1,615,677  1,405,371  8.6  24.8 
Money market accounts 1,680,886  1,670,536  1,589,582  0.6  5.7 
Core deposits 7,897,671  7,713,592  7,067,398  2.4  11.7 
Time deposits and other 1,248,425  1,277,694  1,173,127  (2.3) 6.4 
Total deposits $9,146,096  $8,991,286  $8,240,525  1.7  11.0 
                   

Average core deposits of $7.9 billion for the third quarter of 2016 increased by 2.4% and 11.7% compared to the second quarter of 2016 and the third quarter of 2015, respectively. The rise in average core deposits compared to the second quarter of 2016 resulted primarily from a seasonal increase in average municipal deposits. Compared to the third quarter of 2015, the rise reflects the impact of the core deposits assumed in the NI Bancshares and Peoples transactions, and organic growth.

CAPITAL MANAGEMENT

   
Capital Ratios
   
  As of
  September 30,
 2016
 June 30,
 2016
 December 31,
 2015
 September 30,
 2015
Company regulatory capital ratios:
Total capital to risk-weighted assets 12.25% 10.68% 11.15% 11.43%
Tier 1 capital to risk-weighted assets 9.89% 9.83% 10.28% 10.55%
Common equity Tier 1 ("CET1") to risk-weighted assets 9.38% 9.32% 9.73% 10.00%
Tier 1 capital to average assets 8.90% 8.94% 9.40% 9.29%
Company tangible common equity ratios (1)(2):      
Tangible common equity to tangible assets 8.04% 8.29% 8.59% 8.50%
Tangible common equity, excluding other comprehensive loss, to
  tangible assets
 8.16% 8.37% 8.89% 8.67%
Tangible common equity to risk-weighted assets 9.13% 9.14% 9.29% 9.70%

(1) These ratios are not subject to formal Federal Reserve regulatory guidance.

(2) Tangible common equity ("TCE") represents common stockholders' equity less goodwill and identifiable intangible assets. See the accompanying Non-GAAP Reconciliations for details of the calculation of these ratios.

The Company's total capital to risk-weighted assets was 12.25% as of September 30, 2016, increasing compared to the prior periods presented due primarily to the issuance of $150.0 million of subordinated notes during the third quarter of 2016.

The Board of Directors approved a quarterly cash dividend of $0.09 per common share during the third quarter of 2016, which is consistent with the quarterly dividend paid to shareholders in the second quarter of 2016 and follows a dividend increase from $0.08 to $0.09 per common share during the first quarter of 2015.

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, October 19, 2016 at 11:00 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-0639 (U.S. domestic) or (412) 317-6003 (International) and ask for the First Midwest Bancorp, Inc. Earnings Conference Call. The number should be dialed 10 to 15 minutes prior to the start of the conference call. There is no charge to access the call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's website, www.firstmidwest.com/investorrelations. For those unable to listen to the live broadcast, a replay will be available on the Company's website or by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (International) conference ID 10094285 beginning one hour after completion of the live call until 9:00 A.M. (ET) on October 27, 2016. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.

Press Release and Additional Information Available on Website

This press release and the accompanying unaudited Selected Financial Information are available through the "Investor Relations" section of First Midwest's website at www.firstmidwest.com/investorrelations.

Forward-Looking Statements

This press release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of words such as "may," "might," "will," "would," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "probable," "potential," "possible," "target," "continue," "look forward," or "assume" and words of similar import. Forward-looking statements are not historical facts but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and events may differ, possibly materially, from the anticipated results or events indicated in these forward-looking statements. Forward-looking statements are not guarantees of future performance, and we caution you not to place undue reliance on these statements. Forward-looking statements are made only as of the date of this press release, and we undertake no obligation to update any forward-looking statements contained in this press release to reflect new information or events or conditions after the date hereof.

Forward-looking statements may be deemed to include, among other things, statements relating to our future financial performance, the performance of our loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, including those relating to our strategic objectives regarding the sale-leaseback transaction, anticipated trends in our business, regulatory developments, acquisition transactions, including estimated synergies, cost savings and financial benefits of pending or consummated transactions, including First Midwest's proposed acquisition of Standard, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions. For a discussion of these risks, uncertainties and assumptions, you should refer to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2015, as well as our subsequent filings made with the Securities and Exchange Commission. However, these risks and uncertainties are not exhaustive. Other sections of such reports describe additional factors that could adversely impact our business and financial performance.

Non-GAAP Financial Information

The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practices within the banking industry. As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are useful because they assist investors in assessing the Company's operating performance. These non-GAAP financial measures include earnings per share and the efficiency ratio, excluding certain significant transactions, total non-interest expense, excluding acquisition and integration related expenses, tax-equivalent net interest income (including its individual components), tax-equivalent net interest margin, tangible common equity to tangible assets, tangible common equity, excluding accumulated other comprehensive loss, to tangible assets, tangible common equity to risk-weighted assets, return on average tangible common equity, and return on average tangible common equity, excluding certain significant transactions.

The Company presents earnings per share, excluding certain significant transactions, and the efficiency ratio, both of which exclude acquisition and integration related expenses, the net gain on the sale-leaseback transaction, and property valuation adjustments. In addition, the Company presents noninterest expense, excluding acquisition and integration related expenses. Management believes excluding these transactions from earnings per share, the efficiency ratio, and noninterest expense are useful in assessing the Company's underlying operational performance since these transactions do not pertain to its core business operations and their exclusion facilitates better comparability between periods.

The tax-equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it enhances comparability for peer comparison purposes.

In management's view, tangible common equity measures are capital adequacy metrics meaningful to the Company, as well as analysts and investors, in assessing the Company's use of equity and in facilitating comparisons with peers. These non-GAAP measures are valuable indicators of a financial institution's capital strength since they eliminate intangible assets from stockholders' equity and retain the effect of accumulated other comprehensive loss in stockholders' equity.

Although intended to enhance investors' understanding of the Company's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. See the previously provided tables and the following reconciliations in the "Non-GAAP Reconciliations" section for details on the calculation of these measures to the extent presented herein.

Additional Information for Stockholders

The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger of First Midwest and Standard, First Midwest has filed a registration statement on Form S-4 (file no. 333-213532) with the SEC. The registration statement includes a joint proxy statement of First Midwest and Standard, which also constitutes a prospectus of First Midwest, that First Midwest and Standard will send to their respective shareholders once finalized. Investors and shareholders are advised to read the joint proxy statement/prospectus because it contains important information about First Midwest, Standard and the proposed transaction. This document and other documents relating to the merger filed by First Midwest can be obtained free of charge from the SEC's website at www.sec.gov. These documents also can be obtained free of charge by accessing First Midwest's website at www.firstmidwest.com under the tab "Investor Relations" and then under "SEC Filings." Alternatively, these documents can be obtained free of charge from First Midwest upon written request to First Midwest Bancorp, Inc., Attn: Corporate Secretary, One Pierce Place, Suite 1500, Itasca, Illinois 60143 or by calling (630) 875-7463, or from Standard upon written request to Standard Bancshares, Inc., Attn: Lawrence P. Kelley, President and Chief Executive Officer, 7800 West 95th Street, Hickory Hills, Illinois 60457 or by calling (708) 499-2000.

Participants in the Proposed Standard Transaction

First Midwest, Standard and certain of their respective directors and executive officers may be deemed under the rules of the SEC to be participants in the solicitation of proxies from the respective shareholders of First Midwest and Standard in connection with the proposed Standard transaction. Certain information regarding the interests of these participants and a description of their direct and indirect interests, by security holdings or otherwise, is included in the joint proxy statement/prospectus regarding the proposed Standard transaction. Additional information about First Midwest and its directors and officers may be found in the definitive proxy statement of First Midwest relating to its 2016 Annual Meeting of Stockholders filed with the SEC on April 14, 2016 and First Midwest's annual report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 23, 2016. The definitive proxy statement and annual report can be obtained free of charge from the SEC's website at www.sec.gov.

About the Company

First Midwest is a relationship-based financial institution and one of the largest independent publicly-traded bank holding companies based on assets headquartered in the Midwest. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, equipment financing, retail, wealth management, trust and private banking products and services through over 110 locations in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest's website is www.firstmidwest.com.

Accompanying Unaudited Selected Financial Information

First Midwest Bancorp, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
  
 As of
 September 30, June 30, March 31, December 31, September 30,
 2016 2016 2016 2015 2015
Period-End Balance Sheet         
Assets         
Cash and due from banks$139,538  $149,957  $135,049  $114,587  $125,279 
Interest-bearing deposits in other banks362,153  105,432  171,312  266,615  822,264 
Trading securities, at fair value18,351  17,693  17,408  16,894  17,038 
Securities available-for-sale, at fair value1,964,030  1,773,759  1,625,579  1,306,636  1,151,418 
Securities held-to-maturity, at amortized cost20,337  20,672  21,051  23,152  23,723 
FHLB and FRB stock53,506  44,506  40,916  39,306  38,748 
Loans:         
Commercial and industrial2,849,399  2,699,742  2,634,391  2,524,726  2,392,860 
Agricultural409,571  401,858  422,231  387,440  393,732 
Commercial real estate:         
Office, retail, and industrial1,537,038  1,529,675  1,566,395  1,395,454  1,414,077 
Multi-family625,305  587,104  562,065  528,324  539,308 
Construction401,857  371,016  260,743  216,882  192,086 
Other commercial real estate970,855  1,000,655  1,060,302  931,190  869,748 
Home equity733,260  722,881  683,171  653,468  647,223 
1-4 family mortgages388,145  415,581  390,887  355,854  294,261 
Installment232,030  223,845  213,979  137,602  131,185 
Covered loans24,322  27,180  28,391  30,775  51,219 
Total loans8,171,782  7,979,537  7,822,555  7,161,715  6,925,699 
Allowance for loan losses(85,308) (80,105) (77,150) (73,630) (72,500)
Net loans8,086,474  7,899,432  7,745,405  7,088,085  6,853,199 
OREO28,049  29,990  29,649  27,782  32,035 
Premises, furniture, and equipment, net82,443  140,554  141,323  122,278  127,443 
Investment in BOLI219,064  218,133  218,873  209,601  208,666 
Goodwill and other intangible assets367,961  369,962  369,979  339,277  331,250 
Accrued interest receivable and other assets236,291  225,720  212,378  178,463  203,983 
Total assets$11,578,197  $10,995,810  $10,728,922  $9,732,676  $9,935,046 
Liabilities and Stockholders' Equity         
Noninterest-bearing deposits$2,766,265  $2,683,495  $2,627,530  $2,414,454  $2,671,793 
Interest-bearing deposits6,339,839  6,287,821  6,153,288  5,683,284  5,624,657 
Total deposits9,106,104  8,971,316  8,780,818  8,097,738  8,296,450 
Borrowed funds639,539  449,744  387,411  165,096  169,943 
Senior and subordinated debt309,444  162,876  201,293  201,208  201,123 
Accrued interest payable and other liabilities253,846  160,985  134,835  122,366  119,861 
Stockholders' equity1,269,264  1,250,889  1,224,565  1,146,268  1,147,669 
Total liabilities and stockholders' equity$11,578,197  $10,995,810  $10,728,922  $9,732,676  $9,935,046 
Stockholders' equity, excluding accumulated other
  comprehensive income ("AOCI")
$1,282,666  $1,259,692  $1,239,606  $1,174,657  $1,163,487 
Stockholders' equity, common1,269,264  1,250,889  1,224,565  1,146,268  1,147,669 
               


 
First Midwest Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
               
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2016 2016 2016 2015 2015  2016 2015
Income Statement              
Interest income$97,906  $96,550  $87,548  $84,667  $84,292   $282,004  $251,317 
Interest expense6,934  6,569  6,834  6,655  6,390   20,337  17,731 
Net interest income90,972  89,981  80,714  78,012  77,902   261,667  233,586 
Provision for loan losses9,998  8,085  7,593  4,500  4,100   25,676  16,652 
Net interest income after
  provision for loan losses
80,974  81,896  73,121  73,512  73,802   235,991  216,934 
Noninterest Income              
Service charges on deposit
  accounts
10,708  10,169  9,473  10,303  10,519   30,350  29,676 
Wealth management fees8,495  8,642  7,559  7,493  7,222   24,696  21,669 
Card-based fees7,332  7,592  6,718  6,761  6,868   21,642  20,223 
Merchant servicing fees3,319  3,170  3,028  2,929  3,207   9,517  8,810 
Mortgage banking income3,394  1,863  1,368  1,777  1,402   6,625  3,964 
Other service charges,
  commissions, and fees
5,218  4,498  5,448  4,664  3,900   15,164  8,990 
Total fee-based revenues38,466  35,934  33,594  33,927  33,118   107,994  93,332 
Net gain on sale-leaseback
  transaction
5,509           5,509   
Net securities gains187  23  887  822  524   1,097  1,551 
Other income1,691  1,865  1,445  1,729  1,372   5,001  5,220 
Total noninterest income45,853  37,822  35,926  36,478  35,014   119,601  100,103 
Noninterest Expense              
Salaries and employee
  benefits:
              
Salaries and wages37,872  37,916  36,296  34,295  33,554   112,084  99,444 
Retirement and other
  employee benefits
8,500  8,351  8,298  8,925  7,807   25,149  22,927 
Total salaries and
  employee benefits
46,372  46,267  44,594  43,220  41,361   137,233  122,371 
Net occupancy and
  equipment expense
10,755  9,928  9,697  9,256  9,406   30,380  29,464 
Professional services6,772  5,292  5,920  6,117  6,172   17,984  16,603 
Technology and related costs3,881  3,669  3,701  3,694  3,673   11,251  10,887 
Merchant card expense2,857  2,724  2,598  2,495  2,722   8,179  7,391 
Advertising and promotions1,941  1,927  1,589  2,211  1,828   5,457  5,395 
Cardholder expenses1,515  1,512  1,359  1,329  1,354   4,386  3,914 
Net OREO expense313  1,122  664  926  1,290   2,099  4,355 
Other expenses7,310  8,295  7,447  7,525  6,559   23,052  20,093 
Acquisition and integration
  related expenses
1,172  618  5,020  1,389     6,810   
Property valuation
  adjustments
      8,581        
Total noninterest expense82,888  81,354  82,589  86,743  74,365   246,831  220,473 
Income before income tax
  expense
43,939  38,364  26,458  23,247  34,451   108,761  96,564 
Income tax expense15,537  13,097  8,496  6,923  11,167   37,130  30,824 
Net income$28,402  $25,267  $17,962  $16,324  $23,284   $71,631  $65,740 
Net income applicable to
  common shares
$28,078  $24,977  $17,750  $16,145  $23,058   $70,805  $65,037 
Net income applicable to
  common shares, excluding
  certain significant 
  transactions (1)
$25,476  $25,348  $20,762  $22,127  $23,058   $71,586  $65,037 

Footnotes to Condensed Consolidated Statements of Income
(1) Certain significant transactions include the net gain on sale-leaseback transaction, acquisition and integration related expenses associated with completed and pending acquisitions, and property valuation adjustments related to strategic branch initiatives.

 
First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2016 2016 2016 2015 2015  2016 2015
Earnings Per Share              
Basic earnings per common
  share ("EPS") (1)
$0.35  $0.31  $0.23  $0.21  $0.30   $0.89  $0.84 
Diluted EPS (1)$0.35  $0.31  $0.23  $0.21  $0.30   $0.89  $0.84 
Diluted EPS, excluding certain
  significant transactions (1) (6)
$0.32  $0.32  $0.27  $0.29  $0.30   $0.90  $0.84 
Common Stock and Related Per Common Share Data     
Book value$15.61  $15.38  $15.06  $14.70  $14.72   $15.61  $14.72 
Tangible book value$11.08  $10.83  $10.51  $10.35  $10.47   $11.08  $10.47 
Dividends declared per share$0.09  $0.09  $0.09  $0.09  $0.09   $0.27  $0.27 
Closing price at period end$19.36  $17.56  $18.02  $18.43  $17.54   $19.36  $17.54 
Closing price to book value1.2  1.1  1.2  1.3  1.2   1.2  1.2 
Period end shares outstanding81,324  81,312  81,298  77,952  77,942   81,324  77,942 
Period end treasury shares9,957  9,965  9,976  10,276  10,286   9,957  10,286 
Common dividends$7,408  $7,240  $7,228  $7,017  $7,014   $21,876  $21,047 
Key Ratios/Data              
Return on average common
  equity (1) (2)
8.85% 8.13% 6.06% 5.55% 8.06%  7.72% 7.73%
Return on average tangible
  common equity (1) (2)
12.85% 11.94% 8.87% 8.06% 11.68%  11.27% 11.28%
Return on average tangible
  common equity, excluding
  certain significant
  transactions (1) (2) (6)
11.69% 12.11% 10.32% 10.94% 11.68%  11.39% 11.28%
Return on average assets (2)1.00% 0.93% 0.72% 0.66% 0.94%  0.89% 0.91%
Return on average assets,
  excluding certain significant
  transactions (1) (2) (6)
0.91% 0.94% 0.84% 0.90% 0.94%  0.90% 0.91%
Loans to deposits89.74% 88.94% 89.09% 88.44% 83.48%  89.74% 83.48%
Efficiency ratio (1)60.83% 60.98% 64.82% 64.95% 63.20%  62.12% 63.10%
Net interest margin (3)3.60% 3.72% 3.66% 3.59% 3.58%  3.66% 3.70%
Yield on average interest-earning
  assets (3)
3.87% 3.99% 3.96% 3.89% 3.86%  3.94% 3.98%
Cost of funds0.39% 0.39% 0.44% 0.44% 0.42%  0.40% 0.40%
Net noninterest expense to
  average assets
1.50% 1.61% 1.90% 2.08% 1.60%  1.66% 1.69%
Effective income tax rate35.36% 34.14% 32.11% 29.78% 32.41%  34.14% 31.92%
Capital Ratios              
Total capital to risk-weighted
  assets (1)
12.25% 10.68% 10.64% 11.15% 11.43%  12.25% 11.43%
Tier 1 capital to risk-weighted
  assets (1)
9.89% 9.83% 9.81% 10.28% 10.55%  9.89% 10.55%
CET1 to risk-weighted assets (1)9.38% 9.32% 9.30% 9.73% 10.00%  9.38% 10.00%
Tier 1 capital to average assets (1)8.90% 8.94% 9.56% 9.40% 9.29%  8.90% 9.29%
Tangible common equity to
  tangible assets (1)
8.04% 8.29% 8.25% 8.59% 8.50%  8.04% 8.50%
Tangible common equity,
  excluding AOCI, to tangible
  assets (1)
8.16% 8.37% 8.39% 8.89% 8.67%  8.16% 8.67%
Tangible common equity to
  risk-weighted assets (1)
9.13% 9.14% 9.04% 9.29% 9.70%  9.13% 9.70%
Note: Selected Financial Information footnotes are located at the end of this section.     


 
First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2016 2016 2016 2015 2015  2016 2015
Asset Quality Performance Data             
Non-performing assets (4)              
Commercial and industrial$13,823  $6,303  $5,364  $5,587  $6,438   $13,823  $6,438 
Agricultural184  475  295  355  112   184  112 
Commercial real estate:              
Office, retail, and industrial17,670  16,815  10,910  6,875  6,961   17,670  6,961 
Multi-family316  321  410  796  1,046   316  1,046 
Construction287  360  778  905  3,332   287  3,332 
Other commercial real estate3,361  4,797  5,555  5,611  5,898   3,361  5,898 
Consumer8,156  7,788  8,071  8,746  8,521   8,156  8,521 
Total non-accrual loans43,797  36,859  31,383  28,875  32,308   43,797  32,308 
90 days or more past due loans,
  still accruing interest
4,318  5,406  5,483  2,883  4,559   4,318  4,559 
Total non-performing loans48,115  42,265  36,866  31,758  36,867   48,115  36,867 
Accruing TDRs2,368  2,491  2,702  2,743  2,771   2,368  2,771 
OREO27,986  29,452  29,238  27,349  31,129   27,986  31,129 
Total non-performing assets$78,469  $74,208  $68,806  $61,850  $70,767   $78,469  $70,767 
30-89 days past due loans (4)$25,849  $22,770  $29,826  $16,329  $28,629   $25,849  $28,629 
Allowance for credit losses              
Allowance for loan losses$84,016  $78,711  $75,582  $71,992  $68,384   $84,016  $68,384 
Allowance for covered loan
  losses
1,292  1,394  1,568  1,638  4,116   1,292  4,116 
Reserve for unfunded
  commitments
1,000  1,400  1,225  1,225  1,225   1,000  1,225 
Total allowance for credit
  losses
$86,308  $81,505  $78,375  $74,855  $73,725   $86,308  $73,725 
Provision for loan losses$9,998  $8,085  $7,593  $4,500  $4,100   $25,676  $16,652 
Net charge-offs by category              
Commercial and industrial$1,145  $1,450  $1,396  $1,781  $1,601   $3,991  $11,531 
Agricultural              
Commercial real estate:              
Office, retail, and industrial2,151  1,633  421  267  457   4,205  2,153 
Multi-family(69) 83  179  (27) 67   193  557 
Construction(9) (12) 111  105  (114)  90  (319)
Other commercial real estate415  810  1,294  110  92   2,519  540 
Consumer1,162  1,164  672  1,134  959   2,998  1,870 
Covered loans  2      1   2  514 
Total net charge-offs$4,795  $5,130  $4,073  $3,370  $3,063   $13,998  $16,846 
Total recoveries included above$1,155  $1,003  $1,116  $1,031  $1,294   $3,274  $5,670 
Note: Selected Financial Information footnotes are located at the end of this section.     


First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
           
  As of or for the
  Quarters Ended
  September 30, June 30, March 31, December 31, September 30,
  2016 2016 2016 2015 2015
Asset Quality ratios (4)          
Non-accrual loans to total loans 0.54% 0.46% 0.40% 0.40% 0.47%
Non-performing loans to total loans 0.59% 0.53% 0.47% 0.45% 0.54%
Non-performing assets to total loans plus OREO 0.96% 0.93% 0.88% 0.86% 1.02%
Non-performing assets to tangible common equity plus allowance
  for credit losses
 7.96% 7.72% 7.39% 7.03% 7.99%
Non-accrual loans to total assets 0.38% 0.34% 0.29% 0.30% 0.33%
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans (5) 1.06% 1.02% 1.00% 1.05% 1.06%
Allowance for credit losses to loans, excluding acquired loans 1.13% 1.11% 1.11% 1.11% 1.14%
Allowance for credit losses to non-accrual loans (4) 194.11% 217.34% 244.74% 253.57% 215.45%
Allowance for credit losses to non-performing loans (4) 176.69% 189.54% 208.34% 230.55% 188.81%
Net charge-offs to average loans (2) 0.24% 0.26% 0.22% 0.19% 0.18%

Footnotes to Selected Financial Information
(1) See the Non-GAAP Reconciliations section for the detailed calculation.
(2) Annualized based on the actual number of days for each period presented.
(3) Presented on a tax-equivalent basis, which reflects federal and state tax benefits.
(4) Excludes covered loans and covered OREO.
(5) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk, as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses is established on acquired loans as necessary to reflect credit deterioration.
(6) Certain significant transactions include the net gain on sale-leaseback transaction, acquisition and integration related expenses associated with completed and pending acquisitions, and property valuation adjustments related to strategic branch initiatives.

      
First Midwest Bancorp, Inc.     
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
     
               
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2016 2016 2016 2015 2015  2016 2015
Earnings Per Share              
Net income$28,402  $25,267  $17,962  $16,324  $23,284   $71,631  $65,740 
Net income applicable to
  non-vested restricted shares
(324) (290) (212) (179) (226)  (826) (703)
Net income applicable to
  common shares
28,078  24,977  17,750  16,145  23,058   70,805  65,037 
Net gain on sale-leaseback
  transaction
(5,509)          (5,509)  
Tax effect of net gain on sale-
  leaseback transaction
2,204           2,204   
Acquisition and integration
  related expenses
1,172  618  5,020  1,389     6,810   
Tax effect of acquisition and
  integration related expenses
(469) (247) (2,008) (556)    (2,724)  
Property valuation adjustments      8,581        
Tax effect of property valuation
  adjustments
      (3,432)       
Net income applicable to
  common shares, excluding
  certain significant
  transactions (1)
$25,476  $25,348  $20,762  $22,127  $23,058   $71,586  $65,037 
Weighted-average common shares outstanding:             
Weighted-average common
  shares outstanding (basic)
80,396  80,383  77,980  77,121  77,106   79,589  77,038 
Dilutive effect of common
  stock equivalents
13  13  12  13  13   13  13 
Weighted-average diluted
  common shares
  outstanding
80,409  80,396  77,992  77,134  77,119   79,602  77,051 
Basic EPS$0.35  $0.31  $0.23  $0.21  $0.30   $0.89  $0.84 
Diluted EPS$0.35  $0.31  $0.23  $0.21  $0.30   $0.89  $0.84 
Diluted EPS, excluding certain
  significant transactions (1)
$0.32  $0.32  $0.27  $0.29  $0.30   $0.90  $0.84 
Anti-dilutive shares not included
  in the computation of diluted
  EPS
454  469  608  735  751   510  822 
Efficiency Ratio Calculation              
Noninterest expense$82,888  $81,354  $82,589  $86,743  $74,365   $246,831  $220,473 
Less:              
Net OREO expense(313) (1,122) (664) (926) (1,290)  (2,099) (4,355)
Acquisition and integration
  related expenses
(1,172) (618) (5,020) (1,389)    (6,810)  
Property valuation
  adjustments
      (8,581)       
Total$81,403  $79,614  $76,905  $75,847  $73,075   $237,922  $216,118 
Tax-equivalent net interest
  income (2)
$93,051  $92,174  $83,021  $80,506  $80,511   $268,246  $241,771 
Fee-based revenues38,466  35,934  33,594  33,927  33,118   107,994  93,332 
Add:              
Other income, excluding
  BOLI income
762  984  579  807  446   2,325  1,957 
BOLI929  881  866  922  926   2,676  3,263 
Tax-equivalent adjustment of
  BOLI
619  587  577  615  617   1,784  2,175 
Total$133,827  $130,560  $118,637  $116,777  $115,618   $383,025  $342,498 
Efficiency ratio60.83% 60.98% 64.82% 64.95% 63.20%  62.12% 63.10%
               
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.     


 
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2016 2016 2016 2015 2015  2016 2015
Tax-Equivalent Net Interest Income             
Net interest income$90,972  $89,981  $80,714  $78,012  $77,902   $261,667  $233,586 
Tax-equivalent adjustment2,079  2,193  2,307  2,494  2,609   6,579  8,185 
Tax-equivalent net interest
  income (2)
$93,051  $92,174  $83,021  $80,506  $80,511   $268,246  $241,771 
Risk-Based Capital Data              
Common stock$913  $913  $913  $882  $882   $913  $882 
Additional paid-in capital496,918  495,159  493,153  446,672  445,037   496,918  445,037 
Retained earnings1,003,271  982,277  964,250  953,516  944,209   1,003,271  944,209 
Treasury stock, at cost(218,436) (218,657) (218,710) (226,413) (226,641)  (218,436) (226,641)
Goodwill and other intangible
  assets, net of deferred tax
  liabilities
(357,079) (358,582) (357,895) (327,115) (318,854)  (357,079) (318,854)
Disallowed deferred tax assets(383) (2,263) (2,956) (1,902) (2,889)  (383) (2,889)
CET1 capital925,204  898,847  878,755  845,640  841,744   925,204  841,744 
Trust-preferred securities50,690  50,690  50,690  50,690  50,690   50,690  50,690 
Other disallowed deferred tax
  assets
(255) (1,508) (1,970) (2,868) (4,334)  (255) (4,334)
Tier 1 capital975,639  948,029  927,475  893,462  888,100   975,639  888,100 
Tier 2 capital232,792  81,505  78,375  74,855  73,725   232,792  73,725 
Total capital$1,208,431  $1,029,534  $1,005,850  $968,317  $961,825   $1,208,431  $961,825 
Risk-weighted assets$9,867,406  $9,641,953  $9,452,551  $8,687,864  $8,414,729   $9,867,406  $8,414,729 
Adjusted average assets$10,959,119  $10,608,085  $9,700,671  $9,501,087  $9,559,796   $10,959,119  $9,559,796 
Total capital to risk-weighted
  assets
12.25% 10.68% 10.64% 11.15% 11.43%  12.25% 11.43%
Tier 1 capital to risk-weighted
  assets
9.89% 9.83% 9.81% 10.28% 10.55%  9.89% 10.55%
CET1 to risk-weighted assets9.38% 9.32% 9.30% 9.73% 10.00%  9.38% 10.00%
Tier 1 capital to average assets8.90% 8.94% 9.56% 9.40% 9.29%  8.90% 9.29%
Tangible Common Equity              
Stockholders' equity$1,269,264  $1,250,889  $1,224,565  $1,146,268  $1,147,669   $1,269,264  $1,147,669 
Less: goodwill and other
  intangible assets
(367,961) (369,962) (369,979) (339,277) (331,250)  (367,961) (331,250)
Tangible common equity901,303  880,927  854,586  806,991  816,419   901,303  816,419 
Less: AOCI13,402  8,803  15,041  28,389  15,818   13,402  15,818 
Tangible common equity,
  excluding AOCI
$914,705  $889,730  $869,627  $835,380  $832,237   $914,705  $832,237 
Total assets$11,578,197  $10,995,810  $10,728,922  $9,732,676  $9,935,046   $11,578,197  $9,935,046 
Less: goodwill and other
  intangible assets
(367,961) (369,962) (369,979) (339,277) (331,250)  (367,961) (331,250)
Tangible assets$11,210,236  $10,625,848  $10,358,943  $9,393,399  $9,603,796   $11,210,236  $9,603,796 
Tangible common equity to
  tangible assets
8.04% 8.29% 8.25% 8.59% 8.50%  8.04% 8.50%
Tangible common equity,
  excluding AOCI, to tangible
  assets
8.16% 8.37% 8.39% 8.89% 8.67%  8.16% 8.67%
Tangible common equity to
  risk-weighted assets
9.13% 9.14% 9.04% 9.29% 9.70%  9.13% 9.70%
               
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.     


 
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2016 2016 2016 2015 2015  2016 2015
Return on Average Common and Tangible Common Equity           
Net income applicable to
  common shares
$28,078  $24,977  $17,750  $16,145  $23,058   $70,805  $65,037 
Intangibles amortization1,245  1,245  985  971  973   3,475  2,949 
Tax effect of intangibles
  amortization
(498) (498) (394) (388) (389)  (1,390) (1,180)
Net income applicable to
  common shares, excluding
  intangibles amortization
28,825  25,724  18,341  16,728  23,642   72,890  66,806 
Net gain on sale-leaseback
  transaction
(5,509)          (5,509)  
Tax effect of net gain on sale-
  leaseback transaction
2,204           2,204   
Acquisition and integration
  related expenses
1,172  618  5,020  1,389     6,810   
Tax effect of acquisition and
  integration related expenses
(469) (247) (2,008) (556)    (2,724)  
Property valuation adjustments      8,581        
Tax effect of property valuation
  adjustments
      (3,432)       
Net income applicable to
  common shares, excluding
  intangibles amortization
  and certain significant
  transactions (1)
$26,223  $26,095  $21,353  $22,710  $23,642   $73,671  $66,806 
Average stockholders' equity$1,261,702  $1,235,497  $1,178,588  $1,154,506  $1,134,967   1,225,396  $1,124,493 
Less: average intangible assets(369,281) (369,177) (346,549) (331,013) (331,720)  (361,697) (332,692)
Average tangible common
  equity
$892,421  $866,320  $832,039  $823,493  $803,247   $863,699  $791,801 
Return on average common
  equity (3)
8.85% 8.13% 6.06% 5.55% 8.06%  7.72% 7.73%
Return on average tangible
  common equity (3)
12.85% 11.94% 8.87% 8.06% 11.68%  11.27% 11.28%
Return on average tangible
  common equity, excluding
  certain significant
  transactions (1) (3)
11.69% 12.11% 10.32% 10.94% 11.68%  11.39% 11.28%
Return on Average Assets           
Net income$28,402  $25,267  $17,962  $16,324  $23,284   $71,631  $65,740 
Net gain on sale-leaseback
  transaction
(5,509)          (5,509)  
Tax effect of net gain on sale-
  leaseback transaction
2,204           2,204   
Acquisition and integration
  related expenses
1,172  618  5,020  1,389     6,810   
Tax effect of acquisition and
  integration related expenses
(469) (247) (2,008) (556)    (2,724)  
Property valuation adjustments      8,581        
Tax effect of property valuation
  adjustments
      (3,432)       
Net income, excluding certain
  significant transactions (1)
$25,800  $25,638  $20,974  $22,306  $23,284   $72,412  $65,740 
Average assets$11,322,325  $10,968,516  $10,056,845  $9,822,430  $9,875,632   $10,784,532  $9,661,483 
Return on average assets (3)1.00% 0.93% 0.72% 0.66% 0.94%  0.89% 0.91%
Return on average assets,
  excluding certain significant
  transactions (1) (3)
0.91% 0.94% 0.84% 0.90% 0.94%  0.90% 0.91%

Footnotes to Non-GAAP Reconciliations
(1) Certain significant transactions include the net gain on sale-leaseback transaction, acquisition and integration related expenses associated with completed and pending acquisitions, and property valuation adjustments related to strategic branch initiatives.
(2) Presented on a tax-equivalent basis, which reflects federal and state tax benefits.
(3) Annualized based on the actual number of days for each period presented.

Contact Information Investors: Paul F. Clemens EVP and Chief Financial Officer (630) 875-7347 paul.clemens@firstmidwest.com Media: James M. Roolf SVP and Corporate Relations Officer (630) 875-7533 jim.roolf@firstmidwest.com

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